Discounted Earnings Method Calculator

The multi-stage method discounts an expected series of earnings that grow at a constant rate over a finite forecast horizon using the closed-form growing-annuity formula, then estimates a terminal value using a perpetuity-growth model. This approach limits the instability caused by long explicit forecasts while capturing near-term dynamics.

The capitalization method converts a steady-state earnings figure into enterprise value by dividing by a capitalization rate (discount rate minus long-term growth). The exit-multiple method applies an observed market multiple to terminal-period earnings and discounts that terminal value to present.

This tool follows best-practice controls for input validation, and documents assumptions for traceability. For operational security and integrity of calculations, follow controls consistent with NIST SP 800 series guidance for data handling, ISO 9001 for quality management of calculation processes, and IEEE recommendations for documented numerical methods. Safety and workplace standards referenced are for governance context only (OSHA).

Example: Normalized earnings $1,000,000, growth 5%, discount 10%, horizon 5 years, terminal growth 2% → computes PV of forecast, PV of terminal perpetuity, EV = sum, then equity and per-share.

Example: If steady-state earnings are more appropriate, apply the capitalization method with the same discount and terminal growth assumptions to get a single-period valuation.

This advanced calculator provides three discounted-earnings approaches with clear variable dependencies. Use the multi-stage perpetuity method for detailed forecasts, capitalization for steady-state scenarios, and exit multiples when market comparables are reliable.

Always document inputs, run sensitivity analyses, and disclose limitations. For high-stakes or regulated valuations, corroborate with external audit and follow applicable standards and governance procedures.